2-10-2023 (TOKYO) Sri Lanka, facing financial challenges and a ballooning debt burden, is making progress in discussions with its major creditors, including Japan, India, and France, to reach a comprehensive agreement this month regarding steps to reduce debt, according to the Sankei newspaper. This agreement would likely involve extending repayment terms to help Sri Lanka address its foreign debt obligations.
The island nation has been engaged in multiple rounds of negotiations with bondholders and bilateral creditors, including countries such as Japan, China, and India, as it seeks to restructure its foreign debt after suspending repayments in May of the previous year.
A group of Sri Lanka’s major creditors, which includes the United States, Japan, and India, aims to sign a memorandum of understanding (MoU) with Sri Lanka around the time of the International Monetary Fund (IMF) and World Bank meetings scheduled for later this month in Morocco. While China has been resistant to joining this group, it continues to observe the negotiations.
A senior Japanese finance ministry official commented, “We are aiming to reach an agreement among creditor nations with or without China,” but did not confirm the newspaper report. The official stated, “We will do our best, but we cannot yet confirm if a deal will be reached this month. I personally believe that we can achieve it in time for the IMF’s annual meetings scheduled for this month.”
Sri Lanka has struggled with debt defaults as a result of challenges posed by terrorism and the ongoing coronavirus pandemic, which has significantly impacted its main industry, tourism. As of the end of March 2023, the country’s bilateral external debt amounted to $11.3 billion.
China, as Sri Lanka’s largest single creditor, accounts for 42% of the nation’s overall external debt, followed by Japan at 24%, India at 15%, and France at 4%. These negotiations represent a critical effort to address Sri Lanka’s debt crisis and stabilize its financial situation.
